Naysayers thought fuboTV (FUBO -3.57%) would fumble last week's financial update. It decided to call an audible instead.
Shares of the company behind the namesake sport-centric streaming TV service have soared 80% over the last three trading days. The catalyst was a better-than-expected first-quarter report on Friday morning, but investors had plenty of time to hop on for a ride. The stock has had three days of big gains:
- Friday: up 31%
- Monday: up 27%
- Tuesday: up 9%
The upticks have understandably cooled. No rally lasts forever. However, now that the premium streaming specialist has momentum on its side, can it find a way to keep the bulls close? Let's take a closer look at fuboTV's surprising pop this month.
Tuning out the noise
There is no shortage of trouble spots in the fuboTV model, but let's tackle the reasons for the market's recent attraction to the low-priced stock. Revenue rose 34% to $324.4 million in the first quarter. There was a 41% increase for fuboTV's fledgling business outside North America, but you can set that aside for now. It's just $7.8 million in revenue internationally, barely 2% of the top-line mix.
fuboTV's $316.5 million in its home continent is the ultimate measuring stick, and it's where the growing but profitless media giant provides its guidance. fuboTV was eyeing $295 million to $300 million in North American revenue for the quarter when it initiated its outlook in February. The 34% in North American revenue growth is comfortably ahead of expectations but a far cry from the triple-digit growth it was clocking until a year ago.
Sports fans continue flocking to the platform after cutting the cord from their linear cable and satellite television providers. The platform's 1.285 million subscribers at the end of March -- up 22% over the past year -- also bested expectations. And fuboTV boosted its full-year subscriber guidance as well.
Image source: Getty Images.
The bottom line was not as much a sticking point as in the past. Yes, fuboTV still has a long way to go to meet its goal of generating positive free cash flow by 2025. The red ink isn't as red. It reduced its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss by $36 million and its free cash flow by $40 million compared to the same three months in 2022. This is fuboTV's largest absolute dollar improvement in a profitability metric in its brief but disappointing tenure as a publicly traded company.
There was even good news for investors tiring of the dilution that's been plaguing fuboTV since it began selling freshly minted shares at its low stock price to raise liquidity. Based on its current cash position and trajectory for cash-flow sustainability in two years, it doesn't plan to continue using its at-the-market program that raised $117.5 million in the first quarter at the expense of bloating its share count. fuboTV's outstanding share count has risen by more than 40% over the past year.
fuboTV isn't the biggest player among live TV streaming services but is establishing a solid core base of fans. During its Friday morning earnings call, it mentioned that it's growing its market share, and according to J.D. Power, it now ranks as the top dog in customer satisfaction among live TV services. Its users spend an average of over 100 hours a month on the platform, or more than three hours a day.
A lot can happen in the next two years. It's competing against cash-rich streaming service stocks that also happen to be media and tech titans. If things become more cutthroat, fuboTV may have to push back its profitability timeline and likely its plan to avoid raising liquidity in the meantime.
However, it could also benefit from some tailwinds if the connected TV ad market starts recovering and the migration to live TV streaming services picks up the pace. The stock's 80% pop in just three trading days is turning heads, but now fuboTV needs to turn hearts and pocketbooks.
